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Subcontractor charged for having its own lien bonded off

Based on subcontract language, a Minnesota appeals court has held that the prime contractor could charge its lien bond premium against the sub who filed the lien. Arising from a power generation station project, the prime and a sub pursued breach of contract claims against each other. The sub also filed a lien, which was bonded off by the prime. The underlying case was decided largely in favor of the prime, including the cost of the lien bond. The sub appealed that issue, among others.

Subcontract language included the following: “Should there be any … lien asserted before or after final payment is made that arises from [the sub’s] Services, [the sub] shall reimburse [the prime] for any costs and expenses, including attorneys’ fees, costs and expenses, incurred by [the prime] in satisfying, discharging or defending against any such … lien … provided [the prime] is making payments or has made payments to [the sub] in accordance with the terms of this Agreement.” In conjunction with its decision that the prime owed no more money to the sub, the court also found that payments had been made per the subcontract. Thus, the sub owed the prime for the cost to bond off the sub’s own lien. This decision might not hold up under the laws of many other states, but the Minnesota court enforced the subcontract terms on this point. The case is Corval Constructors, Inc. v. FPD Power Development, LLC, 2015 Minn. App. Unpub. LEXIS 259 (Mar. 23, 2015).

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